The core moat of FAU is micrometer-level alignment and automation, and Largan was upgraded to Buy as its CPO progress accelerated

Overview

This report focuses on FAU in the Asia Pacific technology hardware value chain, specifically the role of optical fiber array units in CPO switches, NPO, and pluggable optical modules. It argues that FAU's value is not just that of a single component, but in its core process capability to connect fibers and optical engines, enabling low-loss transmission. As CPO ramps in 2028-2029, FAU market opportunity, specification upgrades, and supply-chain barriers are expected to increase.

Core views

Core views include: first, FAU is a key pathway in CPO optical interconnect, with Nvidia CPO-switch-related FAU TAM potentially reaching about US$8bn in 2030E; second, the main industry entry barriers are the pitch tolerance requirement of ≤±0.5µm and even ≤±0.3µm, as well as auto-alignment and test capability; third, while GlassBridge may improve assembly yields, it is still early and not a near-term FAU substitute for either current or next-generation CPO designs; fourth, after sampling and testing, Largan has moved into certification and is progressing faster than other new entrants, so its rating was upgraded from Neutral to Buy; fifth, Sunny Optical remains Neutral due to the lack of clear project visibility.

Analysis framework

The report combines supply-chain research, CPO switch shipment forecasts, BOM decomposition, FAU ASP assumptions, technology-roadmap comparison, and company project progress to assess FAU market size, entry barriers, and related equity opportunities.

Methodology notes

• market sizingTAM analysis

  Market size is estimated using CPO switch shipments, the number of optical engines per switch, and FAU unit pricing.

  The report assumes CPO switches reach around 1.4 million units in 2030E, with 115 1.6T-equivalent optical engines per unit, and combines an FAU ASP range of US$80-200 to derive Nvidia CPO-switch FAU TAM of about US$8bn.

• supply-chain analysisBOM decomposition

  Decompose the key component value share of CPO switches.

  The report estimates optical engines, external laser sources, and FAU account for approximately 40-55%, 10-15%, and 5-10% of CPO switch BOM, respectively.

• technology barrier analysisprecision manufacturing and automation capability assessment

  Assess supplier competitiveness based on alignment accuracy, mass-production stability, and automated test capabilities.

  CPO scenarios can require pitch tolerance as tight as ≤±0.3µm, and as channel counts rise from 20-36 to 60-100, manual alignment becomes significantly more difficult, making automation capability a key differentiator.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Largan Precision (LGANF)

  Potential beneficiary in CPO/FAU

  Strengths

  Has moved from sampling and testing over two quarters into certification; has precision optical manufacturing experience; legacy business is supported by years of iPhone specification upgrade cycles.

  Weaknesses

  CPO revenue contribution is mainly from 2028E onward, so short-term earnings realization still needs time.

  Comparison

  Compared with other new entrants, the report views Largan as progressing faster in CPO-related FAU.

  Risks

  End demand lower than expected, intensified competition, slower-than-expected specification upgrades, and slower-than-expected CPO ramp.

• Sunny Optical (SNPTF)

  Potential FAU/CPO-related participant, but project visibility is limited

  Strengths

  Diversified coverage across consumer electronics, automotive, and data communication.

  Weaknesses

  The report points to a lack of specific projects, therefore it remains Neutral.

  Comparison

  Compared with Largan, Sunny Optical has lower visibility on CPO project progress.

  Risks

  Consumer demand weakness, iPhone share gains below expectations, slower-than-expected automotive momentum and ADAS penetration, intensified competition, and withdrawal of government subsidies.

• FAU supply chain

  Critical component supply chain for CPO/NPO and pluggable optical modules

  Strengths

  Benefits from CPO switch scaling, higher channel counts, and value accretion from integrating micro-lenses, prisms, and MT ferrules in higher-end FAU.

  Weaknesses

  Requires years of optical coupling, volume-production experience, and automation capability buildup; newcomer success rates may be limited.

  Comparison

  Asian incumbent suppliers currently dominate, and FAU for CPO is currently supplied by Chinese vendors.

  Risks

  CPO ramp delay, yield and cost shortfalls, and alternative technologies advancing faster than expected.

Key data

• Nvidia CPO switch shipment forecast14k/52k/190k for 2026/2027/2028EBofA technology team expects meaningful scale-up may occur in 2028-2029.
• FAU share of CPO switch BOM5-10%The report estimates FAU is one of the key value components in CPO switches.
• FAU ASP rangeUS$80-200Depends on current specifications; recent prices for 36-channel dFAU are around US$150-200 and may fall to around US$100 by 2030 with volume ramp.
• FAU TAMUS$8bn by 2030ECalculated based on Nvidia CPO-switch-related demand.
• Precision requirementNPO around ≤±0.5µm; CPO up to ≤±0.3µmThis is significantly tighter than the tolerance of about ≤±5µm for active alignment in smartphone long-zoom lenses.
• Largan target priceNT$5,600Based on 25x 2028E P/E, rating Buy.
• Sunny Optical target priceHK$69Based on 17x 2026E P/E, rating Neutral.

Impact & implications

For the supply chain, FAU demand ramping may shift competitive focus from simple optical component supply toward precision alignment, automated testing, and production stability. From an investment perspective, the report favors suppliers with existing precision optical experience and faster CPO project progress, especially Largan; at the same time, it cautions that data communication supply chains are more closed than consumer electronics, so customer adoption and certification pace could determine the actual sequence of beneficiaries.

Risks

• Nvidia CPO switch ramp may come later than expected in 2028-2029.
• If CPO yield and costs are not compelling, CPO/NPO penetration during scale-up could be weaker than expected.
• If GlassBridge-like alternatives quickly solve manufacturing and testing bottlenecks, FAU demand pathways may change.
• FAU ASP could fall with scale, offsetting some market-size growth.
• Consumer demand, competition, and specification-upgrade speed in end markets will affect the legacy business performance of Largan and Sunny Optical.

What to watch

• Whether Nvidia CPO switch shipments ramping from 2026-2028E follows the 14k/52k/190k-unit path.
• Whether Largan's CPO project moves from certification to winning actual orders.
• The pace at which FAU specs upgrade from 20-36 channels to 60-100 channels and multi-layer designs.
• Whether automatic alignment and test capabilities become key drivers of yield and cost differences across suppliers.
• Progress at Corning GlassBridge in PIC alignment, 70+ channel manufacturing difficulty, wafer-level testing, and space-constrained packaging.
• Critical CSPs' route choices among pluggable, NPO, and CPO.